March 19, 2021 / Industry

ESG investing, sustainable retail design and what this means for brands

At the end of 2020, The Financial Times’ Alice Ross published ‘Investing To Save The Planet’. For a year that brought so much uncertainty and angst, the book painted a picture of hope as to how investors and thus ultimately consumers can use their money to save the planet. Let’s look at ESG investing and what this means for stainable retail design for brands.

The Meaning of ESG

The buzzword in the financial sector is ESG; an acronym for environmental, social and governance and a financial trend that seeks to ensure money promotes sustainability and wellbeing of both people and the planet. PwC predicts the growth of ESG investing will see a 21.9% compound annual growth rate (CAGR) from 2019 to 2025. Whilst ESG investing was gaining momentum before 2020, the health crisis accelerated its growth, with Forbes dubbing the year that the environmental, social and governance (ESG) movement in financial services and capital markets came of age. 

Where are we already seeing ESG investing within sustainable retail design and brands?

What does this mean for retail and brands as we move forward? In simplistic terms, ESG translates into conscious investing and conscious investing translates into conscious consumerism. What do conscious consumers want? Conscious brands. From fashion, to beauty, from food and beverages to wellness and technology, brands, old or new, cannot afford to not assimilate to the momentum of ESG investing and how this movement will tip in the mainstream.

E: The acceleration of ‘environmental’ strategies

Perhaps the most evident and potent example of ESG lies within the ‘E’ and the acceleration of ‘environmental’ strategies for brands and sustainable retail design. The E of ESG can translate into retail tactics such as renting, refilling and reusing. In the luxury sectors, sustainable retail design has fuelled renting platforms. Back in September 2020, Selfridges launched a storewide campaign entitled ‘Project Earth’, hosting a reselling platform called ‘Resellfridges’ alongside a renting platform in collaboration with Hurr. Preceding that, last spring, My Wardrobe HQ debuted a pop up where shoppers could rent luxury fashion pieces by a day rate, tapping into a buy letter and buy less mindset. Renting clothes instead of constantly buying new has great impacts for the environment. When it comes to beauty, refill tactics are burgeoning. In Sydney Australia, Folie debuted a refillable beauty outlet in Q4 of last year, encouraging shoppers to return with bottles. In London’s Covent Garden, Boots opened a revamped wellness driven beauty flagship in 2019. Here the beauty retailer debuted a refill station in collaboration with Beauty Kitchen. The goal is that the shopper picks up a bottle for life and they will adopt a ‘return, refill and repeat’ behaviour pattern. Whilst brands will have to work hard to reward shoppers for bringing in their bottles back to the store, it is a strategy that should become mainstream as we takes steps towards sustainable retail design.

G: brands must project their social and governance strategies

Although we have touched upon the ‘E’ of ESG, brands and companies must also project their social and governance strategies. It is true that 2020 did advocate for change regarding the environment, but it was also a year where ‘social impact’ was accelerated. In a brand’s sense, this means ‘human capital’. A brand’s success cannot be solely on how much money it makes, but rather, how well it performs as being a ‘good citizen’ and engaging with the community. 70% of investors want to invest in companies that have a positive social impact (Natixis Investment Managers. At the same time 64% of shoppers will buy from or boycott a brand purely based on its stance towards a social and political issue (Edelman). A brand’s social strategy has never been more important.

S: Where social impact meets stakeholder needs

If we review the S&P 500 Index, companies are being measured and held to account in relation to ESG commitments. When it comes to the S, businesses are reviewed not just only in their behaviour to stakeholders, but to employees and how they interact with their broader community. This means that companies are being held to account as to how they respond to stressful times and how they build goodwill. In addition to this, a company’s social impact is being measured by their commitment to diversity, racism and hiring practices. 

 

Last year, brands created strategies to support people during times of need. The word people here in lieu of consumers was intentional. Brands must embrace the mindset that they are talking to people who have feelings and emotions and want to be listened to and understood. Time Out demonstrated this by rebranding itself as Time In, showcasing recognition for the millions of people in 327 cities it targets that are stuck at home. Content gave people ideas how to make the best of quarantine, with ideas of things to do and words of support for when it came to wellness and mental health. Community outreach has been critical. Brands were showing up for both their customers and their suppliers. One example includes Budweiser’s ‘Save Pub Life’ campaign, where people could purchase a £20 pre-empted gift card to use in their local pub. Budweiser doubled the value, giving landlords a cash boost. As we move forward, a brand’s social impact and community outreach will be critical to a brand’s success moving forward. 

 

With increased attention on ESG investing strategies from investors and shoppers embracing consciously driven purchase decisions, brands must align with this thinking. When companies devise a budget for future marketing, brand strategies and retail design, environmental and social capital must become leading voices at the boardroom table. 

 

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